Vendor consolidation is a procurement strategy where you reduce the number of vendors that your company buys from. Companies don’t want to become overly dependent on a single vendor or a handful of vendors, but there are costs – and risks – from having too many suppliers. There are also benefits to lowering the number of vendors that you do business with.
In this article from Elasto Proxy, a global supplier of industrial rubber products, you’ll learn about six ways your business can benefit from vendor consolidation.
- Lower prices
- Fewer payments and better terms
- Easier vendor monitoring
- Less expensive shipping
- Faster handling
- More efficient stocking
Let’s take a look.
Benefit #1 | Lower Prices
Vendor consolidation can increase your organization’s purchasing power. Instead of buying some rubber gaskets from Vendor A and some rubber grommets from Vendor B, you order both items from the same vendor. This provides you with greater leverage during price negotiations. It’s similar to the volume discount you receive when you order more of a single item, but you’re saving money with multiple SKUs.
Benefit #2 | Fewer Payments and Better Terms
Lower prices aren’t the only reason to reduce your supplier list for industrial rubber products. Processing payments is easier when there are fewer supplier invoices to receive, review, approve, and pay. By reducing the amount of time spent processing payments, you can reduce overhead costs. You can also secure more favorable payment terms since you’re buying more from the vendors that you do pay.
Benefit #3 | Easier Vendor Monitoring
Monitoring performance is simpler when there are fewer vendor scorecards to send, receive, talk about, and act upon. That’s not all either. Just as there’s a cost to processing payments, there’s a cost to adding and maintaining vendor data. Entry-level personnel can add basic vendor information to internal systems, but scorecards usually involve more senior (and more expensive) personnel such as sourcing managers.
Benefit #4 | Less Expensive Shipping
Vendor consolidation can also save you money on freight. Instead of paying to ship a box of gaskets from Vendor A and a box of grommets from Vendor B, you pay for one shipment instead of two. Consolidated shipments, the result of combining multiple less-than-truckload (LTL) shipments into one full container, can also help you to earn preferred rates from carriers.
Benefit #5 | Faster Handling
Reducing the number of shipments can reduce your handling costs, too. Receivers still handle the same number of items, but with greater efficiency. With a single bill of lading, there are fewer documents to open, read, and scan or input. Instead of opening and unloading multiple cardboard boxes, a receiver can spend less time handing packaging materials. There’s less packaging waste, too.
Benefit #6 | More Efficient Stocking
Vendor consolidation can also support more efficient stocking operations. When multiple SKUs arrive in a single shipment, inventory personnel may be able to load a pallet truck with all of the items and then move through the warehouse to each stocking location. That’s more efficient than partially-loading a pallet jack with an item, stocking the shelf, and then returning to the receiving area for the next shipment.
How to Get Started with Vendor Consolidation
Vendor consolidation takes time and effort, but the rewards can strengthen your business operations. Analyzing your annual spending is a good place to start. You’ll also need to develop a plan and secure buy-in from key stakeholders. Don’t just look at pricing, however. Consider all of your costs along with the value of quality and the importance of on-time deliveries.
Where to Find All of the Rubber Products You Need
As part of this process, it’s important to analyze a supplier’s full capabilities. For example, did you know that Elasto Proxy supplies rubber-to-metal bonded products, silicone hose, metallic colored extrusions, molded plastic parts, and sewn products? We’re not just a distributor or a gasket fabricator either.
To learn how you can source more from us and consolidate your vendor list, contact Elasto Proxy.